The reality factor in economic models

The opinions of such a person of standing can carry weight in many circles. I had the privilege to know him from the 1970s to the 1990s when economic academicians from local universities and senior staff of Bank Negara and the Economic Planning Unit provided a lively debate on the economic policies that the government should follow.The Malaysian Economic Association provided the vehicle for such contrasting views for economists to debate their theories and models during the Malaysian Economic Convention. One incident reminds me of Mohamed's comment on comparative advantage: the then Mahathir administration's decision to embark on the national car project in the 1980s.
Most economic academicians were against the idea, citing the non-comparative advantage rule and that it was cheaper to import. Tun Dr Mahathir Mohamad being Dr Mahathir stood his ground. Thus, the birth of the national car industry, from Proton to Perodua and Naza. Mohamed also said: "If the automotive sector is not up to the mark, it has to close down ... The reason Proton didn't do so well was because of the auto policy that they followed. They were tied to high-cost vendors... and that made it uncompetitive internationally ... Our auto industry has been protected for so long that it has remained a baby all the time." Such remarks reflect the opinions of people in air-conditioned offices meddling with their data and economic models and supplying remedies for the ills of the world but out of tune with the realities of the world. Can the problems faced by the biggest automakers in the world be attributed to non-comparative advantage, inefficiencies, high costs, out-dated technology or affirmative action to allow black or aboriginal workers to work in their factories? If these auto giants can have problems without protectionist policies and under open competition, then the theory that free competition will allow for optimal solutions can only happen in computer models. If we were to follow Mohamed's prescription, Ge-neral Motors and others should close down for they have broken revered textbook economic theories.
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